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The capital markets may have over-reactd to news that whoever the next Chairman of the Federal Reserve may be, it most certainly will not be Summers, but have only corrected marginally.

The US dollar is trading well within yesrterday's ranges as the market awaits UK inflation and the German ZEW survey. However, with the outcome of the FOMC meeting moving tomorrow, positions look largely set.

Japan's markets, which were closed Monday, for a the equinox holiday, re-opened today, but failed to play catch up after the strong global equity advance that matrialized in their absence. The Nikkei finished off 0.65%, led by a nearly 5% drop in the telecom sector, wiht KDDI and Softbank losing ground after NTT DoCoMo announced pricing for the new iPhone,though the larger technology sector was a strong performer, gaining 1.8%.

The minutes from the September 3 RBA meeting suggest that while no rate cut is imminent. it shied away from indicating an end to the easing cycle. Indeed, with the Australian dollar having risen nearly 5.75% since this month, the risk of a rate cut has risen rather than fallen. The Aussie reached 3-month highs yesterday near $0.9400, but subsequently pulled back by abotu a cent before finding new bids. Still resistance today is seen in the $0.9340-60 area.

Early European news was limited to the poor August auto sales. The 4.9% decline offsets in full the July increase and for the first 8 months of the year, auto sales are off 5.2%. The 8.14 mln unit paces is the lowest since the time series began in 1990. Four of the top five markets shrank, with the UK still the standout. The European Auto Manufacturing Association reported an 11% increase in UK auto sales, underscoring the robust recovery that has emerged over the last couple fo quearters.

Many of the producers saw lower sales, but BMW, Renault and Daimler (9.9%, 5.8% and 5.5% respectively) were exception and may speak to the bifurcated market, with the lower end of the marekt plagued by the high unemployment and weak growth/recession. Yet, Germany,the regional locomotovie saw a 5.5% decline in auto sales, negating in full the 2.1% increase in July.